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CDR System
 CDR is a voluntary non-statutory mechanism based on
DCA and ICA having a principle of approvals by supermajority.
 It
covers only multiple accounts/ syndication/
consortium of accounts with outstanding exposure of
Rs.10 crore and above by Banks/ Institutions.
 BIFR/ DRT and other suit-filed cases are eligible for
restructuring under CDR.
CDR System - Structure & Legal Basis
A three-tier structure:
 CDR Standing Forum
 CDR Empowered Group
 CDR Cell
Legal basis/ Discipline in the CDR System is provided
by the Debtor-Creditor Agreement (DCA) and the
Inter-Creditor Agreement (ICA).
CDR Membership
Presently, there are 51 CDR Members under
the CDR Forum comprising of the following :
 Public Sector Banks – 26
 Private Sector Banks – 14
 Financial Institutions/ Public Sector Insurance
Companies - 11
CDR Standing Forum
 Representative body of all CDR member FIs,
 Self empowered body
 Comprises Chairman/ CMDs of IDBI Bank,
State Bank of India (SBI), ICICI Bank, Punjab
National Bank (PNB), Bank of India (BOI),
Bank of Baroda (BOB), Chairman of Indian
Banks Association (IBA), and CMDs of all other
member FIs/ Banks
 Lays down policies and guidelines
 Monitors progress of CDR
CDR Core Group
 Small group carved out of Standing Forum
 Comprises Chairman/ CMDs of IDBI, SBI,
ICICI Bank, PNB, BOI, BOB and Chairman,
 Assists Standing Forum in formulating
 Addresses operational difficulties of CDR
Empowered Group
 Lays down guidelines within the broad
framework of RBI Guidelines
CDR Empowered Group
 ED level representatives of IDBI, SBI, ICICI Bank as
standing members
 Senior Executives of FIs, banks with exposure in
concerned company
 Voting in proportion to exposure/ no.
 Approval by super-majority (75% by value & 60% by
 Executives attending EG meetings should have
general authority from their Boards to take decisions
CDR Empowered Group (contd.)
 Two-stage process to facilitate decision making
 Flash Report for exchange of views and in-
principle clearance
 Viability / rehabilitation potential to
 Final Report within 60/ 90 days
 Opportunity to all lenders to express views
 Detailed discussion before approval
CDR Cell
 Assisting CDR Standing Forum/ Core Group/
Empowered Group
 Making initial scrutiny of proposals
 Placing proposals for consideration of EG
 Housed in IDBI
 Staff deputed from Core Group member banks/
 May take outside professional help
 Contribution
 CG Member banks - Rs.50 lakh each
 Other CDR members - Rs. 5 lakh each
CDR - Salient Features
Eligibility Criteria
 Corporates with Multiple Banking / Syndication/
Consortium (Min. 2 lenders)
 Aggregate debt outstanding Rs 10 crore and above
(incl. NFB)
 Cases of fraud and misfeasance ineligible. Wilful
default cases may be considered if permitted by
 Standard & Sub-standard accounts under CDR
 Doubtful accounts under CDR Category-II
CDR - Salient Features
Eligibility Criteria (Contd.)
 DRT and large value BIFR cases (>Rs. 15 crore)
also eligible
 Clearance of Core Group mandatory for BIFR/
Wilful Default cases
 Criteria laid down by Core Group for BIFR cases
 BIFR approval
Reference to CDR System
By any one or more of the creditors
having minimum 20% share in
either Working Capital or Term
Loan or both
By concerned corporate if supported
by a Bank or FI having stake as
Work Process & Timeline
 Final approval by EG within 60 days except
for large, complex cases where 90 days
 Extension up to 180 days (maximum) for
exceptional cases by Core Group
 Decision by super-majority
 Super-majority
dissenting CDR members
Work Process and Timeline (contd.)
Initial scrutiny before submitting Flash –
maximum 30 days
Approval of Flash - zero date
Approval of Final Package - maximum 60/
90 days from Flash approval date
Issue of LOA - within 15 days of approval of
Final Package
Implementation of package by all – within
120 days from LOA
Financial Parameters
 Viability Parameters- Benchmarks
- DSCR - 1.25:1 (Avg. Adj. DSCR in first 5 years)
- Return on Capital Employed
G sec + 2%
- Gap between IRR and cost of
capital – at least 1%
- Break-even analysis – in line with industry
- Industry indicators – comparison with
EBIDTA, price realization, etc
- Loan life ratio- 1.4:1
Monitoring Mechanism
 Effective implementation is the key to success of the
 Adherence to timelines
 Compliances
 By promoters & lenders
 Operational hurdles
 New developments/ environmental challenges
 Capex / debt servicing issues
 Review of performance vis-à-vis projections
Monitoring Mechanism (contd.)
 Monitoring Institution
 Usually Referring lender or the Lead lender
 Monitoring Committee
 Three or more lenders (TL, WC, minority). CDR Cell
and Borrower as invitee.
 Concurrent Auditor / LE / SA
 Independent expert agency
 Terms of reference on case to case basis
 Performance & variance analysis
 Concurrent audit / TRA structure and monitoring
Monitoring Committee
Role and Functions
Working out restructuring package in large,
complicated cases from Flash stage
Monitoring sanction, implementation as per
Ensuring compliance by promoters, company
of various stipulations
Ensuring security creation and sharing of
security between term lenders and working
capital banks
Overall Position of References
(as on March 31, 2014)
Sr. No. Proposals
No. of
Total Debt
(Rs. Crore)
Advantages of CDR to the Company
Approval to package by Super Majority is
binding on all CDR lenders.
Availability of cash flows on account of
deferment of principal repayment/ funding of
interest, which helps the Company in focusing
on its operations and come out of the stress.
Irregular portion in CC/ devolved LCs may also
get converted into WCTL to be repaid over a
Advantages to the Company
 Reduction in interest rate in WC & TL helps
improve the profit margin for the Company.
However, interest re-set (after 3 years for TL & 1
year for WC) would be there.
 Conversion of a part of unsustainable debt into
equity/ equity related instruments to improve the
debt servicing/ interest servicing capability of the
Company, if acceptable to lenders.
Advantages to the Company (contd.)
 Retention/
Classification by the lenders, in most cases, helps the
Company by way of more positive approach from the
lenders including grant of any additional funds
(Working Capital and/or Term Loan), if necessary.
 Monitoring
(MI) &
Committee (MC) play an important role and
therefore, Company may interact mainly with MI &
MC members instead of a large no. of lenders
(ranging from 10 to 30 in many cases).
Advantages to the Company (contd.)
 After admission of the case itself under CDR
System, ‘Standstill Clause’ & ‘Holding on
Operations’ are available to the Company which
helps them arrest any further deterioration.
 There is time-bound approach under CDR.
Package gets approved within 60/90 days and
implementation within 120 days of the approval.
Advantages of CDR to the Lenders
 Lenders can retain/ restore ‘Standard Asset’ classification,
if not repeated restructuring.
 Atleast 25% of lenders’ sacrifices has to be brought by the
 Additional security of pledge of Promoters’ shares &
Personal Guarantee of Promoters.
 Lenders can convert part of debt into equity whereby
provision requirement will reduce. Further, they can
possibly enjoy the upside in equity in future.
Advantages to the Lenders (Contd.)
 Provisioning on account of sacrifice is usually
lesser than it would have been required to
make upon account being downgraded to
Substandard/ Doubtful.
 Further, provision requirement in CDR case
gets reduced each year whereas it increases
each year in case of NPA accounts.
Advantages to the Lenders (Contd.)
 Lenders may agree for the package only if viability is
established. For this purpose, they can get TEV Study
carried out to satisfy themselves regarding the
 Lenders can stipulate to bring back investments in
subsidiary companies, if any. Sale of idle or non-core
assets/ unprofitable units can be part of the package to
reduce the debt.
Advantages to the Lenders (Contd.)
 There is better monitoring in CDR cases by
way of MI & MC being there. Further, usually
Concurrent Auditor/ Lenders’ Engineer is
appointed to have a control on Company’s
operations/ accounts.
 TRA is stipulated to capture entire cash flows
and also ensure better financial discipline in
the Company.
Thank You

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